When Will The College Tuition Bubble Burst?

By Ben PopkenSeptember 1, 2010

This is a chart from the Carpe Diem blog showing the increase in college education costs, U.S home prices, and the consumer price index. If we had a housing bubble, the skyrocketing costs of higher education is a super bubble.

How did we get here? There’s no way the value of that education has kept track with its price.

Well, private lenders are part of the story.

Private lenders cropped up marketing easy credit to students, while at the same time giving kickbacks to schools that shuttle students to these private lenders. The more these schools raised rates, the more students turned to the private lenders, and the profits for the school and the lender kept rising.

Obviously this isn’t the case at all universities, but it is at enough. Remember the big settlements Andrew Cuomo got from NYU and U Penn over accepting kickbacks from Citibank? You know that if those guys were caught, there were many more out there doing the same.